Dot com companies offer new options Buying all crop inputs from one source makes no more sense than planting only one cotton variety or relying on only one marketing strategy.
"Farmers need to diversify operations, whether it's buying materials or marketing crops," says Fulton Breen, chief executive officer of XSAg.com, an online exchange service based in Raleigh, N.C., that puts farmers and sellers together much the same way a multi-listing service and real estate agent work for potential home buyers and sellers.
"The Internet should be part of a farmer's buying strategy," Breen says, "but not all of it."
Breen and marketing manager Scott Peoples say current economic trends (higher input costs and lower commodity prices) should encourage shrewd shopping for crop protection chemicals, fertilizer, seed, animal health products and equipment parts.
"Farmers can now buy online, choosing the price they want to pay," Peoples says.
"But it's also a good idea for a buyer to hedge his bets and never buy his entire inventory through an e-commerce outlet," Breen says. "For instance, he may want to buy 20 percent of anticipated need from a local dealer. If he buys more than he needs, he can return the excess locally."
Breen says buying online will become commonplace within five years but admits that dot com companies still have some educational tasks ahead.
"We hear a lot of misconceptions about our company in particular and agricultural e-commerce in general," he says. "For one, we're not trying to put local dealers and distributors out of business. Farmers still buy products from these outlets, even when they order over the Internet.
"We own no inventory; we buy no products. We remain completely neutral and simply put buyers and sellers together in a mutually beneficial relationship."
He also points out that XSAg, despite the connotations of the name, does not deal in excess or surplus products. "XS stands for Exchange Service, not excess," he explains. "All products bought and sold through our service are new, manufactured products in unopened containers."
Peoples says farmers may shop Internet sources for several reasons. "The main one is price," he says. "But availability also may be a factor. If a product, because of heavy demand, is not available locally, an Internet search through a dot com company may locate it somewhere else."
Breen also notes that XSAg does not price products. That's left to individual dealers or distributors who use the service to find buyers.
"Prices for the same product may vary depending on location.
"And there is more than one way to buy online," he says. "A grower may ask for bids on a specified amount of a specific product and determine what's available. Or he can indicate that he wants a certain amount of the product and specify what he's willing to pay. This is a Name Your Price, sometimes called a reverse auction," Breen says. "Naming a price and allowing the whole country to bid on the business is a possibility."
Andy Pace, sales representative, says buyers should consider what they want from a seller. "Some want both product and service," he says. "They may want someone locally available to provide application recommendations. If that's the case, they should buy locally.
"But if they do not need that service, they should not pay for it. With online buying, the seller is anonymous and separates product from service."
In some situations, dealers may offer two-tiered pricing, Pace says, one for just the product and another for product plus service.
Breen says the geographical coding XSAg incorporates into its program provides both freight and regulatory advantages.
"We know where the buyer and seller are, based on the geo codes," he says. "That allows us to plot the most direct route for delivery. Also, we deal in real-time freight costs, so figures quoted are accurate.
"Also, if a product is not registered in the buyer's state, the sale does not take place."
Geo codes also allow dealers to offer incentives. "A dealer can provide free delivery within a specified area," Breen says. "And he can do it anonymously. He also can exclude information on where a product is sold and at what price."
Peoples says online security, once considered a significant hurdle for dot com purchases, is no longer a real issue.
"Fraud is no more apparent over the Internet than for any other buying point, actually a bit less," Breen says. He says credit card numbers transmitted over the Internet are more secure than checks or credit cards presented to local retailers because of encryption technology.
"The key to using the Internet to manage costs is to use it as another financial management tool," Breen says. "Using a dot com company to buy products should never be an all or nothing proposition, but another option to improve profit margins."